Shopping for auto warranties can be difficult if you don't know how to evaluate the auto warranty contract. One of the reasons car warranties get a bad rap is that people buy them without reading the contract. Then, when a repair isn't covered, their naturally upset. Yes, unscrupulous companies will take advantage of a buyer who doesn't read the contract before buying. All auto warranty contracts are divided into several sections and while the format may vary, they all contain the same information. If all the information isn't in the document, it's not likely a contract, but a sales brochure. Make sure you're reviewing the auto warranty contract. Most auto warranty contacts will have at least the following sections: Definitions, Terms and Conditions, Coverage, Filing a Claim, Service Department Guidelines, Cancellation Procedure, and Exclusions. Each section is important and you need to be able to determine if a section is favorable or not. Once you have evaluated each section, you're ready to make a decision. Securing an excellent auto warranty can be easy if you take this approach. With an understanding of auto warranty contracts, there's no reason to depend solely on what you're told by a salesman. Let's look at the Definitions Section. In this section you'll find the term "failure" and/or "mechanical breakdown". Warranties providing less coverage only pay for mechanical breakdown . These extended auto warranties define mechanical breakdown as a defect in parts and workmanship of the manufacture's supplied part, or a defect that makes the part unable to perform the function for which it was designed. It's reasonable to believe that if a part was poorly manufactured, it will break within the first few years when the vehicle is still under the factory warranty. The broadest auto warranty coverage will also pay for a failure of a part. Failure coverage includes repairs needed because of wear-and-tear. Usually defined as: "a failure will be deemed to have occurred when a covered part has worn beyond the manufacturer's tolerances". Mechanical breakdown extended warranties will not cover repairs needed because a part's performance has gradually deteriorated because of normal wear and tear, unless a mechanical breakdown has occurred first. Some companies don't offer failure coverage while others only offer failure coverage until the vehicle reaches 50,000 miles. Considering as much as 25% of all repairs needed are because of wear-and-tear failures, this auto warranty coverage is important. Extended auto warranties without wear-and-tear coverage are often priced the same as those that include it, so be careful and know what you're getting. Last year there were 37 new companies selling auto warranties and by the end of the year 28 were no longer in business. How do you protect yourself? First, make sure you are buying from a direct seller rather than a broker or car dealership. There's no reason to pay the increased price or assume the risk of a middleman when you can buy direct from the warranty company. Second, make sure they've been in business at least 10 years. If you do these two things, you'll be in good shape.